Crowdsourcing snack food trends at PepsiCo
Examines how PepsiCo is using open innovation in their Lay’s “Do Us a Flavor” competition and ways they can more broadly utilize crowdsourcing to stay competitive in a trend-driven market
Crispy taco, wasabi ginger, and southern biscuits & gravy. These chip flavors are the million dollar ideas that won their inventor $1 million in prize money in PepsiCo Lay’s “Do Us a Flavor” competition. PepsiCo has hosted four rounds of this contest starting first in 2012. The competition solicits millions of ideas for new chip flavors from participants and then lets everyone vote on which flavor should actually be brought to shelves. This campaign was a huge marketing success even in its first run with 3.8 million ideas received and 22.5 million weekly Facebook page visitors.1 Beyond the marketing reach, this campaign is also a major asset to PepsiCo’s product development process.
The snack food market has been booming with US sales up 12% in the last four years for a total of $145 billion today.2 The healthy food and drink subcategory has especially taken off, driven mostly by small manufacturers who make up 60% of the clean-label market.3 Many companies, including PepsiCo, have resorted to billion-dollar acquisitions of these smaller food brands to gain access to this category.2 In order stay competitive in a snack food market heavily influenced by trends, PepsiCo needs a more systematic process to identify these emerging trends and develop new products in-house.
In the short term, campaigns like “Do Us a Flavor” are great ways to innovate existing product lines. The first step crowdsources flavor ideas from millions of participants, which massively scales the ideation funnel and makes it more likely to capture the upper tail end of “good” ideas. Next, they use Facebook to ask millions of users to “like” a flavor if they would eat it. This allows PepsiCo to quickly filter down ideas with zero investment in developing the recipe, speeding up the iteration phase. Ultimately, the company estimates that they have been able to reduce their time to product launch to 10 months from the original 15-20 months.1 They also saw a 12% increase in sales from the first competition, suggesting this new process also produces better results.1 However, it appears FritoLay is mostly using the competition as a marketing stunt as most of the past winning flavors have been discontinued.
In the long term, PepsiCo appears to be broadening its use of crowdsourcing, looking to also generate ideas for healthy ingredient substitutions and new product lines. In May 2017, they posted a request on open innovation website NineSights seeking “new and novel protein sources for usage in their snacks and beverages”.4 On another website eYeka, described as “a community of talented creators who love to solve brands’ challenges with fresh thinking,” PepsiCo Mexico ran multiple contests to gather ideas for snacks for working people during breaks and at their desks, as well as snacks that can be shared among couples and friends.5
While PepsiCo has been quite successful with these types of contests, they focus mostly on idea generation. They should also consider crowdsourcing the prototyping phase of their product development cycle. For example, for the “Do Us a Flavor” competition, PepsiCo only develops the actual flavor recipe for the 3 finalist ideas, likely because this step is R&D intensive. If they were to instead directly crowdsource recipes, they could potentially test many more flavors, increasing the likelihood of a successful flavor that actually stays on the shelf.
Longer term, PepsiCo should also engage earlier with the food startup community to identify and partner with promising new brands. It takes lots of capital to begin production on new food products, so there would be a lot of value for entrepreneurs to work with PepsiCo to bootstrap their manufacturing. Through this community, PepsiCo could spot food trends faster and source ideas for new products or companies to acquire.
While the idea of open innovation is exciting, it is not without limitations. Many companies that employ crowdsourcing for ideas face intellectual property rights issues.6 This would become even more of a concern if PepsiCo started to crowdsource actual recipes instead of just ideas. Additionally, there are privacy concerns about the data PepsiCo collects during their “Do Us a Flavor” competition. Currently, they use Facebook likes as their votes, giving them access to data on user location, gender, birthday, photos, list of friends and status updates.7 In light of Facebook’s recent data privacy scandals, users may become more cautious in sharing their data and participating in these types of competitions. (726 words)
1 Brittany W, “Crowdsourcing Your Next Chip Flavor: Lay’s ‘Do Us A Flavor’ Campaign,” HBS Digital Initiative, March 24, 2018, https://d3.harvard.edu/platform-digit/submission/crowdsourcing-your-next-chip-flavor-lays-do-us-a-flavor-campaign/.
2 Julie Creswell, “PepsiCo to Acquire the Fruit and Veggie Snack Maker Bare Foods,” NYTimes, May 25, 2018, https://www.nytimes.com/2018/05/25/business/dealbook/pepsico-bare-foods.html.
3 “Booming Snack Sales Highlight a Growth Opportunity in Emerging Markets,” Nielsen, March 12, 2018, https://www.nielsen.com/us/en/insights/news/2018/booming-snack-sales-highlight-a-growth-opportunity-in-emerging-markets.html.
4 “Novel Protein Sources,” NineSights.com, https://ninesights.ninesigma.com/servlet/hype/IMT?userAction=Browse&documentId=34971ac66b581486cf68bd73ad1a7c10&templateName=&documentTableId=1008809492095505715.
5 “#PepsicoSnacks – Invent the new PepsiCo Snacks!,” eYeka.com, https://en.eyeka.com/campaigns/21-pepsicosnacks.
6 de Beer, McCarthy, Soliman, and Treen, “Click here to agree: Managing intellectual property when crowdsourcing solutions,” Business Horizons, Volume 60, Issue 2 (April 2017).
7 Stephane Clifford, “Social Media Are Giving a Voice to Taste Buds,” NYTimes, July 30, 2012, https://www.nytimes.com/2012/07/31/technology/facebook-twitter-and-foursquare-as-corporate-focus-groups.html.
Thanks for sharing this – this is a great demonstration of how open innovation can touch products central to everyday life, and how even established companies can use the principle successfully. I agree with your assessment that internal development is extremely important given the current state of the snack industry, and that crowdsourcing can be an effective way to facilitate that.
I’m intrigued by your idea that PepsiCo crowdsource recipes in addition to flavor ideas. While I certainly see the benefits, I wonder if the complexity of ingredient lists (as of 2015, Doritos had 34 processed ingredients according to The Washington Post – I recommend checking out their picture of all of them) makes this idea too challenging for a real “crowd.” I think an interesting intermediate option could be for consumers to submit both a flavor and the sub-flavor profiles that believe make it up. So for instance southern biscuits and gravy might come along with the submitter’s thoughts on the flour type they have in mind, the texture, the smell, etc. to give Pepsi’s team a head start.
I agree with TOM 199 above that asking for full-on recipes (even at an early stage) would potentially limit the open innovation to a narrower set of people. I also think that this could limit the amount of innovative ideas that come out; by artificially asking those with much more limited resources / food science backgrounds to develop things within their potential capabilities.
I wonder what drives the discontinuations of the flavors? To me that signals that Pepsico is not serious about the products and that this whole thing is a gimmick, not a true source of innovation. Have there been any examples of the health food / substitute crowd-sourcing being successful and actually brought to market? I wonder also how Pepsico filters through all the ideas that come through such a channel. Did they create any teams dedicated to the evaluation of crowd-sourced ideas? How do they filter that to their product development teams? Also – without the Facebook-style voting for new flavors, how do they determine what are actually good ideas versus the idea of one individual?
The most interesting thing about this campaign is that regardless of the actual winning flavors, Pepsi still comes out on top. They’ve not only collected an immense amount of information about their core consumes ( i.e, people who would participate in this competition), but they’ve also collected information on their taste preferences. This can be critical data if (and when) another brand comes in to take over Lays’ snack dynasty. Pepsico will at minimum be equipped with this data set that might be predictive of the flavors and food categories that folks are interested in. Maybe this is all just a ploy to see if Pepsico should sell more than just snacks. Frozen meals perhaps?
Thanks for sharing this! I really enjoy the idea of bringing product development closer to the consumer and this campaign is a pretty creative way to increase engagement across the Lay’s portfolio. Although I think it would be pretty cool to move from solely idea generation to prototyping, I do think it may add more complexity to the process than it is worth. Perhaps if you could socialize the prototyping exercise wider than just the Pepsi corporate office, then that might be a wider form of engagement. Regardless, I agree it would be great to find a way to translate these crowd-sourced ideas into longer term success on the shelves!
I am curious as to whether or not the investment in open innovation for snack flavors is actually a technological advance or a marketing campaign. This approach brings more visibility to the brand, engages with consumers in a whole new way, and attracts new consumers to try the limited edition / new flavors. Regardless, the open innovation approach works in the company’s favor and helps the company bring ideas to life that they already know will be received by a broad audience (which is pretty brilliant). I wonder, however, whether or not there is anything else the company can do beyond crowdsourcing to continue to innovate in the space. What about the packaging? Or where you can purchase the chips?
I really enjoyed reading this and frankly would love an everything bagel bag of chips right now. To Farrah’s point above, I think the open innovation strategy for snack flavors serves the dual purpose of a marketing strategy and sourcing ideas. Although there are some limitations as you’ve noted above, the opportunity to source ideas and widen the funnel from the end users of the product seems like a no brainer – why limit idea generation to a few employees when you can leverage so many other voices?
Interesting read! I had not thought about IP or privacy issues when it comes to crowdsourcing ideas. I am curious about the idea of crowdsourcing full recipes: when I think about it, this could almost be a type of snack startup accelerator. For those recipes that do best, Pepsico could partner with the innovator and realize his/her aspirations for the snacking world. At the very least, it would be a great marketing move!
Very insightful! Crowdsourcing for PepsiCo has seemed to be a resource used to reduce capital spending and processing time during innovation. I’d be curious whether large CPG firms realistically envision these ideas to be long-term sustainable revenue engines for the foreseeable future or marketing ploys to attract more eyes to its brand. Though these contests provide an efficient way of gathering a wealth of ideas, actually testing and producing a desired flavor seems to be the overarching issue. What would it take to make the “Do Us A Flavor” challenge produce a viable product in the long-run? Would it be feasible to crowdsource the tasting component in addition to the idea gathering process?
This was a great read. Quite fun as well! Like with most open innovation initiatives, I’m curious to know what the competitor reaction is. Could a competitor simply copy the flavour after seeing it do well in the market? It would also be interesting to see what would happen if PepsiCo continued created product flavours derived from open innovation. For example, could winners start demanding royalties for each unit sold? Really curious to see how this develops in the future.
Excellent article! I really appreciated you question at the end regarding the potentially changing landscape of crowdsourcing when/if there is a substantial change in the methods of data sharing and usage globally. Right now, Facebook and other social media platforms provide, as you mentioned, an ideal platform to collect massive amounts of collateral data beyond the scope of the immediate problem with millions of potential users. If the availability of this data were to change, do companies like PepsiCo and others have a plan for managing less data, reduced inbound marketing or a separate platform that may provide more data with fewer potential users? All great questions I’d love to hear more about!
Insightful article about the potential of open innovation to revolutionize the snack-food development process. While such innovation may lead to popular products, I fear that it will only amplify trends towards addictive, unhealthy snack foods. It may help PepsiCo’s bottom line to develop addictive, popular products, but if these products contribute to the rise of obesity, heart disease, and diabetes, should they exist at all? As one of the main companies that feeds America, I believe PepsiCo must take responsibility for the rise of diet-driven disease leading to significant healthcare expenditure. Are there ways for PepsiCo to create popular and healthy products that involves open innovation? Or is the snack food industry simply at odds with health? Unprocessed fruits and vegetables will always be better for you than the healthiest bag of chips.
Thinking of the Dove case we did in marketing today – I wonder what the balance is between innovation and control of the messaging? Frito obviously does not need to take all the ideas sourced through open innovation, but I wonder if they have become so dependent on the customer for innovation that they are unable to do so themselves in the future. The balance between internal and external open innovation is one that I think could be revisited by Frito in the future if they see a slowdown in customer interest in their product, therefore a slow down in customer ideas.
Great job, Toby Johnson! Crowd sourcing ideas in the food industry is a fantastic idea. What’s even better is making it a contest. Contests have high levels of engagement and earned media. I am a bit surprised by some of the winning flavor ideas, such as “southern biscuits & gravy” since I wouldn’t typically associate those complex flavors on chips. What I would like to know is how much testing these ideas costs. I imagine Frito Lay has incredibly complex and specialized production lines and that it would not be feasible to adapt them for one-off new flavor testing purposes but perhaps there is a more adaptable “job shop”-type production testing functionality that’s better for this case.
Thank you for a great deep dive into flavor crowd sourcing activities in PepsiCo. I enjoyed reading this piece and like your thought on the next steps of this process. The one thing which appears questionable to me is the idea of crowd sourcing the prototypes. Specifically for Lays PepsiCo currently uses the only one type of potatoes which is patent protected and it is illegal for other companies and individuals to use. Therefore if we crowd source the sampling it won’t be Lays due to different potatoes.In case other companies and individuals will be allowed to use the very same potato type Lays may lose its key competitive advantage.
Insightful article about Pepsi’s use of open innovation! I agree that these types of campaigns tend to generate a significant amount of marketing buzz, but that in all likelihood it ends up not actually contributing to long-term product innovation. The key benefits I see in this tactic are to keep Pepsi top of mind with customers and to gain critical customer insights by enabling additional customer engagement with the Pepsi brand that they wouldn’t get from traditional focus groups.
I don’t necessarily agree though that Pepsi should partner with promising new brands. Companies that already have some degree of brand recognition are likely to be expensive for Pepsi to acquire and will be more difficult to integrate compared with brands that are built in-house. Rather, the idea around crowd-sourcing in a more early-stage manner like with recipes is a good one as it allows Pepsi and the entrepreneur to partner in brand-building, to reduce product costs and mitigate potential IP issues.
This was an excellent read. I really liked your write up on the “Do Us a Flavor” competition. While I agree that crowd sourcing ideas can be a creative, cost effective solution, this write up also got me thinking about what the limitations are. In addition to your point in the last paragraph about IP, I also worry about what the following article calls “Danger of Manipulation”: https://www.ispo.com/en/markets/id_79709436/crowdsourcing-pros-and-cons-and-how-you-can-profit-from-it.html. What if your competitors feed you “false feedback”? While it is more challenging to manipulate something like “do us a favor”, I think it could be very easy to manipulate something like a Facebook poll. This is something that Pepsi should weary of when it uses crowdsourcing methods.
Really interesting topic, thanks for sharing! For a D2C brand, the creative crowd-sourcing, e.g. Lay’s Do Us A Flavor, makes a ton of sense, delivering valuable customer data to the company while allowing consumers to develop a deeper connection with the brand. However, I wonder about the value of crowdsourcing more specific questions, such as “source of protein.” I feel that the issue brands face in discussing these types of specific questions is a biased set of consumers that care enough to answer these questions. The consumers that will take the time to go on innovation websites and give advice to brands are not necessarily indicative of the average consumers – they just might be a “vocal minority.” So, while I think it is create that Lay’s is using this input experimentally, I would be a bit more rigorous when applying this to larger changes in the product line.
Great read! I agree with Farrah’s point about this being more of a marketing campaign than a true search for a new flavour to add to the SKUs on a permanent basis. As I view these innovation competitions and product lunches, I see them as a way for snack and beverage companies that have relatively constant purchasing (i.e., non-seasonal) to create limited time hype and drive a spike in sales coupled with renewed engagement with the brand. Frito-Lay seems to be on to something, as other brands are following suit. More recently, Polar Seltzer has created competitions for limited edition flavours and released seasonal seltzer flavours.
Cool topic! I love that Pepsi is building engagement with their customers through crowd-sourcing. You mentioned that most crowd-sourced flavors have been discontinued… were their life cycles shorter than usual compared to the average for Pepsi? I’m wondering if they are meant to be “limited edition” in order to drive excitement and make way for constant inflow of new items, or if they are truly looking for a new flavor to permanently add into their portfolio. I’d love to see sales information to see which flavors have been successful. I agree that Pepsi could bring customers even further into the R&D process, although I don’t know if crowd-sourcing recipes would be feasible. I think it would be great if Pepsi let customers sample multiple recipes for the winning flavors and choose which one tastes best before they go to market with a final recipe.
Interesting article! I’ve actually been to the Frito Lays consumer tasting events where they showcase experimental flavors and gauge consumer reactions. It’s such a fun way to engage consumers and get real time feedback from typical customers. The biggest risks are around ensuring to get a representative group and figure out which are more fad vs stable products.
This piece answered one of my main questions regarding open innovation for something like chips: is it more so just a marketing stunt than a good use of crowdsourcing for product development. One thing I would like to know is why those winning chip flavors were discontinued. Were the top picks just not good? Are surveys like what they used not useful for the idea selection process? I also really appreciate the thought on data privacy which brings up another hidden reason for companies to pretend to care about ideas of their customers. Are they learning more from the data they are collecting than from the surveys on their favorite chip flavors or both?
Great piece! I immediately thought of Lays when learning about open innovation as a method of product development. They’ve done an excellent job in taking advantage of crowdsourcing and using data to spot new viable markets for different product lines, which has obvious benefits for the broader PepsiCo family of brands. I think you raise a very important point regarding the issue with ownership and intellectual property, as is commonly a risk/issue when using open innovation to source ideas. One way to possibly address this issue is to invite creators to be featured on the bag or in commercials when promoting the new flavor. I think by having consumers more intimately involved in the R&D process across different products aside from chips, PepsiCo is essentially elongating customer lifetime value. One way to improve this partnership and perhaps the quality of ideas is to localize open innovation challenges according to different geographies. This will perhaps increase the likelihood of producing a flavor that bodes well within different regions.
Thanks so much for sharing this fun and interesting use of open innovation! To echo some of the comments above, it’s unclear whether Pepsi uses open innovation for product development versus for marketing purposes. I’d be really interested in learning a bit more about the process Pepsi uses whittle down the list of submissions to the 3 finalists on Facebook. For example, do they use the full list of submissions and analyze trends/frequent ideas? To your point, the ideas they’re receiving from customers are “flavor” names versus actual recipes, so I wonder how they distinguish between “trendy” flavors verse flavors they can execute well. I found it interesting that they collect votes on Facebook – this is very smart since they can ultimately learn so much about what their target segment may want outside of just this contest (for future product flavor profiles).
This was such an interesting read, thanks for sharing! I think it’s great how PepsiCo is using customer inputs to create its products. It’s a win-win situation: customers get what they want and PepsiCo does well as a result! And kills two birds with one stone: (1) product development and (2) marketing. It’s quite genius, really!
This article was great. I enjoyed reading on how Pepsico has used crowdsourcing to develop new flavors on their portfolio of products. I agree with the author that more of an actual product innovation tool, this crowdsourcing effort has been a marketing stunt in order to get consumers talking about the brand. I believe the use of corwdsourcing for such a commoditie has some limitations as it is hard for the company too test the success of the developed product in an effective way. It requires a lot of resources to produce such a product and such product might not be representative of what the market as a whole wants.
I am not sure how easy it would be for Frito-Lay to crowdsource complete recipes for flavor development since this is an expertise informed by food science and food chemistry, a field not accessible to many. However, I love the idea of Frito-Lay opening up its labs and production equipment for curious people to tinker and join the development process. I think an inherent challenge in the entire food R&D process, however, is gauging customers’ real appetite for the product. You mention it yourself, that “it appears FritoLay is mostly using the competition as a marketing stunt as most of the past winning flavors have been discontinued.” How many people will actually find your product, interesting, delightful, and nutritious (or just amazing) enough to eat and buy again and again? FritoLay uses votes amassed on the internet as a proxy for the desirability of a food product. In reality…people have a wide variety of tastes and preferences within the snack food category, and even today it’s hard to discern what kind of product will be successful, or to read how taste buds en masse are evolving.
Honestly, this type of open innovation campaign from PepsiCo is brilliant from a cost-savings perspective, for two reasons. The first is the fact that PepsiCo has essentially “outsourced” its R&D and marketing research to the masses, saving money on otherwise expensive in-depth market research activities. The second is that they have essentially turned this into a PR/marketing opportunity, thereby saving costs from what would otherwise be a “just another” release of another PepsiCo product. It’s interesting to think of how other companies in the future similarly find cost-saving synergies between open innovation initiatives and other business-as-usual activities.